Two Relative Strength Index (RSI) Strategies that Do Not Work

Definition from StockCharts:

RSI oscillates between zero and 100. Traditionally, and according to Wilder, RSI is considered overbought when above 70 and oversold when below 30.

A naive implementation of it would be exit when RSI > 70. Lets see how it worked out vs. a simple buy-and-hold.

CNX 100-RSI-returns-2010

A simple B&H strategy was miles ahead of one that exited the market whenever RSI indicated “overbought.”

How about being long only when the index is an uptrend (> 200-day SMA) and RSI is not ‘overbought’ (< 70)?

CNX 100-RSIxSMA-returns-2010

Using RSI was a net negative – it under-performed both a buy-and-hold and a SMA-200 strategy.

Would it work on other indices?


CNX NIFTY-RSI-returns-2010

CNX NIFTY-RSIxSMA-returns-2010


CNX BANK-RSI-returns-2010

CNX BANK-RSIxSMA-returns-2010


The naive RSI strategies described above are money losers. The gains are nowhere near enough to compensate for the losses. A simple buy-and-hold strategy ends up outperforming the RSI.

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